(Updated to add information in the last two paragraphs about the
settlement payment made by JTI-Macdonald Corp. Updates trading
activity.)
A Reynolds American Inc. (RAI) subsidiary agreed to pay the
Canadian government C$325 million to settle claims related to
cigarette smuggling in the country during the 1980s and 1990s.
Martin L. Holton III, general counsel for the R.J. Reynolds
Tobacco division, said the company was pleased to reach a
resolution to the matter after more than a decade of
litigation.
The R.J. Reynolds division doesn't conduct business in the
Canadian tobacco market. Along with its parent company, R.J.
Reynolds sold its international businesses--including its former
Canadian affiliate--to Japan Tobacco Inc. (2914.TO) in 1999.
As part of the agreement with Canadian officials, the
second-largest U.S. tobacco company behind Altria Group Inc. (MO)
said that should it decide to sell tobacco products in Canada in
the future, Reynolds agreed to adopt packaging, marking and other
measures that will assist the Canadian governments in their efforts
to combat the movement of contraband tobacco products in
Canada.
Additionally, Northern Brands International Inc. agreed to pay a
fine of C$75 million as part of a plea agreement with the province
of Ontario in a separate matter. That settlement involved
allegations of conspiracy to aid others in the sale and possession
of contraband cigarettes in the early 1990s. Northern Brands ceased
being an operating company in 1997.
Separately, Canadian tobacco-maker JTI-Macdonald Corp. confirmed
it has made a C$150 million payment to settle claims related to the
illicit trade of ciagarettes in the 1990s. The smuggling occurred
before Japan Tobacco acquired the former R.J. Reynolds unit.
As part of its settlement, JTI-Macdonald has also agreed to
implement measures to strengthen controls over the movement of
tobacco products and to help combat contraband, the Canadian
government said in a news release.
Reynolds American's shares were recently down 0.6% to
$54.20.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com
(Judy McKinnon in Toronto contributed to this article.)